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The physics of “poverty”

The federal government now considers a family of four in New York City to be poor if its pre-tax income is below $37,900.Even with full medical coverage.

The calculation helps explain why newly revised Census Bureau figures hike the number of poor Americans to 49 million as of last year, further widening an already yawning gap between ordinary perceptions of poverty and how the government sees it.

This breathtaking number begs the question: What does it mean to be “poor” in the United States?

To the average American, the word “poverty” means significant material hardship and need. It means lack of a warm, dry home, recurring hunger and malnutrition, no medical care, worn-out clothes for the children. The mainstream media reinforce this view: The typical TV news story on poverty features a homeless family with kids living in the back of a van.

But poverty as the federal government defines it differs greatly from these images. Only 2 percent of the official poor are homeless. According to the government’s own data, the typical poor family lives in a house or apartment that’s not only in good repair but is larger than the homes of the average non-poor person in England, France or Germany.

The typical “poor” American experiences no material hardships, receives medical care whenever needed, has an ample diet and wasn’t hungry for even a single day the previous year. According to the US Department of Agriculture, the nutritional quality of the diets of poor children is identical to that of upper middle class kids.

In America, about 80 percent of poor families have air conditioning, nearly two-thirds have cable or satellite TV, half have a computer and a third have a wide-screen LCD or plasma TV.

All these government statistics were based on the Census Bureau’s old definition of poverty. The new definition, released last week, stretches that gap between common-sense and government perspectives even further.

Previously, a family of four was considered poor if cash income was less than $22,800. The new definition sharply jerks up this threshold, especially in large cities.

Now, a family of four with full medical insurance, living in Oakland, can be considered “poor” if its yearly pre-tax income is below $42,500. In Washington, DC, the figure is $40,300; in Boston, $39,500; in New York, $37,900.

Remarkably, for the first time these new poverty thresholds are linked to an “escalator” that will boost them faster than inflation year after year. The income thresholds will rise automatically in direct proportion to any rise in the actual living standards of the average American.

While the old poverty measure counted absolute purchasing power (how much steak and potatoes you can buy), the new measure counts comparative purchasing power (how much steak and potatoes you can buy relative to other people.)

This means it will be difficult to reduce poverty in America no matter how much the living conditions of the poor actually improve. Imagine a sprinter in a race where the finish line is moved back four feet every time the runner takes a step.

Look at it this way: If the real income of every single American were to double overnight, the new measure would show no drop in poverty because the poverty-income thresholds also would double. Under this new definition, we can reduce poverty only if the incomes of the “poor” rise much faster than those of everyone else.

The goal of fighting poverty is no longer about meeting physical needs; instead it has been covertly shifted to equalizing incomes, or “spreading the wealth.”

Karl Rove, Mitt Romney, and the consultants thought it ill-advised to call this kind of orchestrated move toward institutionalized socialism “socialism”. Me, I’m not as stupid or tone deaf as are they.

The idea behind this is to enforce equality of outcome — not by the barrel of a gun but by the shame mechanisms and envy associated with class warfare. Until such time as the producers conclude that it simply makes more sense to join those who take rather than actively subsidizing them.

This is how the “income gap” will be “fixed”: conformity, and equality in decline. Until the money runs out. At which point, who the hell knows what will happen.

Comments (9)

Speaking of relativity, I’ve been looking for a place to slip this next bit in.

There is a perverse relationship between markets, money, and politics that owes to the nature of fiat currency and the natural fit it has in large collective systems. Like the world, as it turns out.

We begin in markets where since roughly 2000 there has been an unnatural force working called, for want of a better term, printed credit. I’ll talk just about the short version of this phenomenon and ask you to look at the dot-com bubble. It was funded with an enormous amount of investment capital wagered against empty market entities and when it burst much of that capital was lost, generating a need to, in an enormous government debt climate, rebuild the market or risk stagnation or worse. The solution was to involve federal debt money — the common US dollars available in any virtual barrel of ink.

And so the real estate bubble was created, partly by the Federal Reserve, partly by the construction and inflation of derivative financial products and instruments, and partly by the deeply flawed federal mortgage industry per everyone from Obama himself back through to Dodd, Frank, Clinton, et al. All of these factors were just as deeply unnatural and debt-based and all of them failed. Today the Fed still carries an impossibly large balance of this implosion. Now what to do?

The answer since has been literal debt creation, money being debt and fiat money having the property of spontaneous creation. First was Quantitative Easing, then QE2, then QE3/Twist, and now QE Infinity, as it’s called, the regular infusion of this monetary heroin into the market’s arm. What does all this look like graphically?

You can clearly see the various booms and busts. Note how the last uptrend begins on the eve of QE1 — the nearly one trillion in federal cash infusion — and how various natural pullbacks since 2008 have been addressed with subsequent easing. What’s alarming is that the current downtrend (punctuated by the little December rally starting right about now) has occurred in the wake of permanent quantitative easing. In other words, the junkie isn’t getting his highs anymore.

Other phenomena deep in this system bear watching. For example, with all this artificiality the market no longer runs on natural fundamentals. Instead it runs on its own momenta, they in turn led by daily dollar news and conditions, whether they’re led by the Euro or by Bernanke. Among these momenta are those connecting QE Infinity’s regular fixes as they influence major bank funds to themselves influence the market such that when the dollar rises the market now falls, so upside down are the relationships between supply and demand, between natural correction and stability.

What you have is a system that has developed a reliance on progressive monetary and fiscal stimuli. And this calls into play a very perverse relationship between politics and the perception of economic progress. Here’s how that works.

Consider that Boehner just said he was optimistic a fiscal cliff deal could be reached. In reaction today an otherwise down market is up half a point or more. Yesterday prices had fallen on Harry Reid’s comments that little progress had been made on fiscal cliff talks. You’ll note the obvious narrative, which is that Republicans, in order to keep this artificial system moving along as it’s become dependent on doing — meaning relying solely on monetary stimuli and not natural productivity and market growth and correction — must capitulate to this artificiality or risk incurring what a natural system would naturally do.

Which is to chase back down to the roughly 7,500 point market instead of the 13,000 market created by money manipulation.

Of course Washington knows this, even it 99 out of 100 sitting members don’t know how or why. I also suspect more Republicans than Democrats view the 13,000 point DOW as the paramount indicator, making their view that we must Do Everything Possible to make big numbers at as least as complicit with the kernel problem as is the typical Democrat-Socialist view. Remember, I said this was perverse.

The present global monetary system, combined with its natural partner in Keynesian/Socialist/Progressive policy and agency, involves rampant positive feedback — artificial systems driving themselves ever more unstable. Politics being politics these unnatural systems must be recreated in paralleling and equally unnatural political rhetoric and positions.

In this case avoiding the very well branded “Fiscal Cliff” calls into play just another injection of whatever monetary drug the market makers can finagle so as to not let nature seek its course. This can be perpetuating and even enhancing the cash flows all over the American Socialist system and it can involve all that printing press activity — the two now produce the same relative effect.

Both pursuant and prefacing this villainry naturally we’ll see and hear an endless stream of joint Democrat and Republican narratives willfully uncorrected by reality itself. This, I think, is why the Republicans are doomed, and moreover why they find their only two options to be to either capitulate or to literally cease to exist.

Anything they say to outline our real trajectory will, like a material trajectory correction itself, crash their own careers just as the markets must crash in order to be restored to natural function.

Is this Cloward Piven strategy coming to fruition? Answering that would involve establishing intent, but had CP envisioned anything like this I think they would have approved.

Marx’s definition of poverty late in his life is now that of the US Census Bureau. When people criticized Marx because poverty wasn’t going up like it was supposed to but instead going down, he simply switched the definition.

Whereas earlier he considered poverty to be measured by how much stuff you had or cound buy, he redefined poverty to be entirely relative. Therefore, if the poor were getting richer, they were actually getting poorer if the rich got richer at a faster rate.

That way, Communism will always be necessary, even if we’re all able to afford a new Lexus. Thank God our Census Bureau finally agrees.

Until such time as the producers conclude that it simply makes more sense to join those who take rather than actively subsidizing them.

This is how the “income gap” will be “fixed”: conformity, and equality in decline.

There is another way: tell the State that you are poor and unemployed, while still working on the side. It’s been going on forever, but most of us were too proud to participate. Well, my pride is costing more than I’m willing to pay any more.

Twenty-odd years ago, a kid from my graduating class made a very good living as a contractor. He’d get “laid off,” continue working for his regular employer off the books until the benefits ran out, then magically get called back to work for as long as it took to reset the counter on the benefits. My classmate loved it, ‘cuz he made lots of money double-dipping. His employer loved it, ‘cuz he could “employ” the guy for way less money off the books, and undercut his competitors on bids. My classmate’s girlfriend loved it, ‘cuz it meant her guy could buy her jewelry and a nice car.

I hated him for that, and looked down on him as a liar, a cheat, and a crook. Now I realize that he was just ahead of his time. I should look him up and see if he can give me any pointers…

But perhaps the scariest chart in the entire presentation is the following summarizing the unsustainable welfare burden on current taxpayers:

For every 1.65 employed persons in the private sector, 1 person receives welfare assistance
For every 1.25 employed persons in the private sector, 1 person receives welfare assistance or works for the government.

So, the wife and I are supporting more than one welfare recipient.

What’s crazy is, I kicked my own kid out of the house and told him to get a job.

What’s crazier is, he did, and now he and his wife are supporting more than one welfare recipient. And worried if they can afford a kid of their own…

The federal government now considers a family of four in New York City to be poor if its pre-tax income is below $37,900.Even with full medical coverage.

My taxable income (self-employed gross receipts less expenses) is less than this, yet I’m considered “rich” because I will be affected when the “Bush Tax Cuts for the Wealthiest Americans” expires. Along with the “tax cuts for the rich”, Bush’s tax cuts also created a 10% bracket, which will go away and bump me up to the 15% bracket.

Sweet. By some definitions, I’m “poor”, but when it comes time to “soak the rich”, I get soaked with a 50% tax increase.

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